Invesco QQQ ETF versus the Technology Select Sector SPDR Fund
Gregory S. Davis | January 14, 2025
Reviewed by etfready.com staff
Choosing the the ETF Best for Your Portfolio
Most U.S. cellphone users are either deeply entrenched is the Apply iPhone ecosystem or thought of as rebelling against the system with their Google Android device. Both camps are fiercely loyal to their product and not willing to entertain the other device.
For investors looking to expand their tech exposure in their portfolio two camps to consider include the Invesco QQQ ETF (QQQ) and the Technology Select Sector SPDR Fund (XLK). Like the cellphone products, on the surface the ETF products appear similar, but let’s take a closer look below to determine if investors need to be loyal QQQ or XLK.
ETFReady.com (QQQ) vs (XLK)
How are the QQQ and XLK different?
The top holdings for each ETF are identical, however the Invesco QQQ ETF (QQQ) has nearly twice as many holdings, charges approximately 2X the fees and is trading at a price nearly 2X as high as the XLK.
How are the QQQ and XLK similar?
QQQ and XLK have returned over 100% over the past 5-years and the expense ratios are relatively low given the quality of the investments in the portfolio.
Can I choose based on the P/E Ratio?
Instead of trying to label one ETF as the best, perhaps investors should consider which ETF is best for them based on the P/E Ratio.
The P/E Ratio communicates how much investors are willing to pay for $1 of earnings. A higher P/E Ratio suggests higher expected future earnings and therefore a higher expected rate of return.
In contracts a lower P/E Ratio suggests undervalued stocks with less expected growth potential. Here, given QQQ’s PE Ratio of 22.70 versus the XLK’s PE Ratio of 23.77 it’s just too close to call. Keep in mind that no single ratio tells the whole story.
Conclusion: Consider the fit into your overall portfolio.
If your portfolio is currently heavily invested in Apple, Microsoft and NVDIA then you may prefer the QQQ which will provide more exposure to additional tech companies and perhaps offer more diversification if that is your goal. If you are looking to double down on your Apple, Microsoft and NVDIA then the XLK may be right for you. Before making a decision take the time to look under the hood of the ETFs you are considering and consider how they fit into your existing holdings.